Question
Advanced Enterprises reports yearminusend information from 2018 as follows: Sales (160,250 units) $968,000 Cost of goods sold 641,000 Gross margin 327,000 Operating expenses 263,000 Operating
Advanced Enterprises reports yearminusend information from 2018 as follows: Sales (160,250 units) $968,000 Cost of goods sold 641,000 Gross margin 327,000 Operating expenses 263,000 Operating income $64,000 Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by 14.5%, and as a result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. Should Advanced increase the selling price in 2019? A. Yes, because operating income increases for 2019. B. Yes, because sales revenue increases for 2019. C. No, because gross margin decreases for 2019. D. No, because sales volume decreases for 2019.
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